Mtrsi.com

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• PLANNING

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Outline for discussion

• Definition
• Significance of planning
• Types of plans
• Steps in the planning process
• Nature of strategies
• The three level of strategy

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Outline for discussion

• Strategic planning process
• Competitive analysis in strategy formulation
• Major kinds of strategies and policies
• Porter competitive strategies
• Strategy implementation

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PLANNING

• Planning involves defining the organization
  objectives and goals, establishing an overall
  strategy for achieving these goals, and
  developing a comprehensive hierarchy of plans to
  integrate and coordinate activities
• Planning is a locomotive that drives the engine
  of organizing, leading , coordinating and
  controlling

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Why Planning Is Important

• Planning ascertains where the organization is now
  and deciding where it will be in the future.
• Sense of direction and purpose
• Sense of Participation
• Reduces the impact of change
• Minimizes wasteges and redundancy
• Coordination -Plans specify who is responsible
  for the accomplishment of a particular goal.

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Planning The Primary Management Function
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Types of plan

• Plans are classified on the basis of
• organizational level
• Strategic plans
• Operational Plans

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Strategic Plans

• Detailed action steps mapped out to achieve
  strategic goals
• Generally developed by senior management and
  usually have a time horizon of 3 - 5 years.

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Operational Plans

• Set out specifically what, and how, must be
  achieved to achieve organisational objectives.
  Time horizon of no more than 1 year.
• Success of strategic and operational objectives
  are reliant on success of operational plans.

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PLANNING

• Plans based on frequency of use
• Singe use plan - A one time plan that
  specifically designed to meet the needs of a
  unique situation and is created in response to
  non programmed decisions that managers make.

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• Standing plans- Ongoing plans that provide
  guidance for activities repeatedly performed in
  the organization and that are created in response
  to programmed decisions that manager make. Eg
  Policies ,Procedures, Rules,Programs,Budgets

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Planning
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Mission

• Essential purpose of the organization, concerning
  particularly why is it in existence , the nature
  of the businesses it is in and the customers it
  seeks to serve and satisfy

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Mission Of MTRSI

• To inculcate an attitude of continuous
  achievement , social commitment and ethical
  values in the students
• To provide an enabling environment for nurturing
  future leaders and entrepreneurs

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Further Examples

• .
• MCDONALDS MISSION TO OFFER THE FAST FOOD
  PREPARED IN THE SAME QUALITY WORLD WIDE WITHIN
  REASONABLE PERIOD
• RANBAXY LABORATORIES TO BECOME RESEARCH BASED
  INTERNATIONAL PHARMACEUTICAL COMPANY

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Setting a Vision

• Vision
• Vision is a short, and inspiring statement what
  the organization intends to become and to achieve
  at some point in the future.

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VISION OF MTRSI

• To emerge as a world class management institute
  imparting multifaceted management training with a
  passion for excellence.

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PLANNING

• ADITYA BIRLA GROUP
• Our VisionTo be a premium global
  conglomeratewith a clear focus on each business.
• Our MissionTo deliver superior value to our
  customers, shareholders, employees and society
  at large.

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PLANNING

• Strategies
• Determination of basic long term objectives
  of an enterprise and the adoption of courses of
  action and allocation of resources necessary to
  achieve these goals

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PLANNING

• Policies
• They are general statements or understanding
  that guide or channel thinking in decision making
  
• They define an area within which a decision
  is to be made and ensure that the decision will
  be consistent with and contribute to an
  objective
• Recruitment Policy of TCS is an
  equal-opportunity employer
• Personnel policy of ABB India states that each
  employee would understand his role, take
  responsibility, and develop him according to the
  changing needs of job profile and organization.

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PLANNING

• Procedures
• It is chronological sequence of steps to be
  undertaken to achieve an objective.
• They are guides to action that specify in details
  the manner in which activities are to be performed

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PLANNING

• Rules
• Spell out specific action or non action leaving
  no discretion
• They regulate the day to day conduct of affairs
  by providing detailed instructions
• Eg No smoking zone in aircrafts or offices,
  restaurants

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PLANNING

• Budgets
• A statement of expected results of given future
  period expressed in numerical terms
• It indicates the financial resources necessary
  for supporting the various activities included in
  the program

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Determining the Organizations Goals and
objectives

• Goals denote what an organization hopes to
  accomplish in future period of time. A broad
  category of financial and non financial issues
  are addressed by goals that firm sets for itself
• Objectives are the ends that state specifically
  how goals shall be achieved.

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Goals and objectives-setting at Canara Bank

• OUR MISSION IS TO BE THE MOST COMPETITIVE AND
  PROGRESSIVE INSTITUTION IN OUR INDUSTRY The bank
  stated goals were growth, innovativeness , high
  profit as a barometer of efficiency, high
  involved employees distinctively charged with
  pride

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Goals and objectives-setting at Canara Bank

• Growth has been achieved in terms of customers (
  --million) , reserves (Rs ) Average business
  per employee ( ) deposit per branch
• Innovations were reflected in terms of new
  schemes like mutual funds and setting up
  financial services as merchant banking and
  portfolio management
• A high profit of more than the industry leader
• Employees involvement has been sought through
  delegation of authority and devolution of power
  at grassroot level through change in
  administrative structure ,

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ITC-e-Choupal Case
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Background Note

• ITC was established on August 24 1910 as Imperial
  Tobacco company initially involved in Trading of
  imported cigarettes
• As backward integration move it started packaging
  and printing business.
• In 1975 ITC welcome group tied up with US BASED
  sherton group
• It also started paper board manufacturing
  facility
• IN 1990 Set up international business division
  for export of Agri commodities

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Background Note

• In 2000 started greeting cards business under
  brand name Expressions
• ALSO ENTERED FASHION RETAILING BUSINESS WILLS
  LIFESTYLE
• In 2001 entered into food business and safety
  matches
• In 2002 launched clothing brand john player
• In 2003 started manufacturing Agarbati

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Background Note

• In march 2005 the board of directors of ITC
  approved company 5 year plan which involved
  investment of 140 billion.
• The plan included setting up new plants and
  upgrading existing ones in its tobacco , foods ,
  apparel, paperboards , packaging and hotel
  business

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ITC - Business Portfolio
ITC
FMCG Cigarettes Other FMCG
Paperboard Paper Packaging
Agri Business Leaf Tobacco Agri Commodities
Hotels
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• Corporate level strategies are decision related
  to allocating resources among the different
  businesses of a firm, transferring resources from
  one set of business and managing and nurturing a
  portfolio of business in such a way that overall
  corporate objectives are achieved.

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SBU LEVEL STRATEGY

• The organization is managed as portfolio of
  business , each business unit serving a clearly
  defined product and market segment with a clearly
  defined strategy
• Each business unit in portfolio develops
  strategy tailored to its capabilities and
  competitive needs but consistent with overall
  organization capabilities and needs

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Strategic Business unit objective For Agri
business division/ FMCG

• To establish long term relationship with end
  consumer
• To develop sense of trust among farmers by
  associating them in very business
• To procure farm outputs directly from the farm
  gate by removing intermediaries and passing the
  price advantage on to the farmers

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Problems

• Not expected Profit Margins
• Reasons
• ITC lacked sufficient control over the supply
  chain of agricultural products
• -Farmers were located in far flung villages
• -could not determine and control the quality of
  the products therefore could not attract and
  retain International buyers
• Lack of infrastructure for storage

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• Transportation of produce
• Middleman Intermediateries

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Type of model

• Hub Spoke
• Component of the model
• For e- choupal
• A personal computer
• Power facility
• A telephone line for logging on the internet
• Infrastructure (to house the pc)

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Type of model

• Manpower (a sanchalak who is basically a farmer,
  a sanyojak who is well trusted business man and
  other staff)
• For the Hub
• A computer and telephone line
• Infrastructure
• A house to keep computer

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Type of model

• Store house to stock agri and non agri goods
• Manpower a hub in charge and other staff
• An Open Space for the purchase Point.
• ITC Installs a computer with V-SAT Internet
  connection

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Type of model

• Hubs now replaced with New form of rural retail
  mart choupal sagar in potential areas
• Tie up with various companies which use channels
  which ITC has created .For eg
• FMCG-, PHILIPS,EVERREADY.,MILTON
• Agri-input-BASF,PI, CHAMBAL FERILIZERS,
• Automobiles TVS Motors
• Banks- ICICI Lombard, ICICI Prudential

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ITC- Choupal Sagar
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ITC- Choupal Sagar
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penetration

• 35-40 choupals per hub
• 4-5 catchment villages per choupal
• On an average 150-200 villages per hub.

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Speciality of the model

• Farmers know the price 12 hrs before the sale of
  the produce
• Farmers benefited from accurate weighting, faster
  processing time and prompt payment. Got a higher
  prize than mandi price
• Farmers paid in cash across the counter.

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Main competitors

• Un organized commission agents in backward
  integration
• In procurement of wheat cargill, Australian
  wheat board
• ITC rural retail- DSCL,(Hariyali Kisan Bazaar)
  Godrej, Tata kishan sansar, cargill saathi,
  mahindra subhlabh)

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SWOT ANALYSIS

• STRENGHTS
• Strong brand image in rural areas
• Assured higher prices to the farmers
• Effective and efficient control of supply and
  demand
• Wide range of FMCG products

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• WEAKNESS
• Sanchalak were integral part of this model but
  lacked business acumen
• Poor Infrastructure- Power, connectivity, social
  problem, credit related problem

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Opportunities

• Vast potential as retailing is the booming sector
  for future
• Huge untapped market
• Can utilize its well established channel for
  business expansion

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Threats

• New big companies are entering the market
• Competition from local market

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Food processing industry

• Opportunities
• A high demand potential because AVERAGE INDIAN
  SPENDS 52 of his income on food, rising
  personal income, emergence of nuclear families
  and rise in the number of working females
• A projected shift in Indian eating habits
• Deep inroads made by the spread of tv s
  advertising media, and emergence of retailing
  culture

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Food processing industry

• Diverse agro- climatic condition
• Increasing preference for indian food abroad
• Govt developing agri zones and mega food parks to
  promote food processing industry in india
• Low cost indian labour can be used to set up
  large, cost effective manufacturing units for
  domestic and exports market

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Food processing industry

• Threats
• Conservative govt policies
• High Taxation on packaged items
• In adequate infrastructure for distribution and
  preservation Lack of investment in cold chain

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FMCG Business InitiativesBranded Packaged Foods

• Leverages
• Unique Agri sourcing skills
• ITC Welcomgroups specialist cuisine bakery
  knowledge
• FMCG distribution synergies
• ITC RD Centre, Bangalore
• 5 chosen categories
• Staples
• Aashirvaad Atta, Salt, Spices
• Biscuits
• Sunfeast
• Salty Snacks
• Potato chips, Bridge products Bingo!
• Confectionery
• Candyman, Mint-o
• Ready to Eat
• Kitchens of India (Ready to Eat, Conserves
  Chutneys and Frozen Foods), Aashirvaad (Instant
  Mixes Cooking Pastes), Sunfeast Pasta

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FMCG Business InitiativesBranded Packaged Foods

• Aashirvaad Atta
• Current market leader amongst national branded
  players leverages the e-choupal network for
  cost-quality optimisation and region specific
  offerings
• Sunfeast Biscuits
• Differentiated innovative products continues
  to build consumer franchise distributed
  outsourced supply chain being ramped up
• Number of innovative products in the pipeline
  leveraging the capabilities of the ITC RD Centre
• Business working on improving product mix and
  supply chain efficiencies

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Staples

• Entered in 2002
• GOI proposal to remove restriction on the
  movement of agri-commodities across gave a boost
  to trade
• Success depended on 2 factors effective
  distribution network quality
• Made emphasis on making accurate sales forecast
  using input from distributors ,sales personnel
  and good MIS system.
• ITC enjoyed cost advantage be of e-choupal and
  its printing business

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List of competitors in branded wheat flour market

• HLL-Annapurna
• Pillsbury- pillsbury
• Agrotech Healthy world
• Cargill- Nature Fresh

• Fortified with iron and vitamins
• Healthy Heart
• High Protein and vitamin content
• Purity

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ITC FOODS-Tasting Success? MAJOR COMPETITORS

• In ready to eat Segment
• MTR
• SATNAM OVERSEAS LIMITED
• ASTY BITES
• PRIYA FOODS
• GITS

• In biscuits
• ITC
• PARLE
• BRITANNIA
• SURYA
• PRIYA

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Strategic Planning

• Strategy planning is managements game plan for
  running the business.
• Managers need strategies to guide HOW the
  organizations business will be conducted and HOW
  performance targets will be achieved.

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Three Big Strategic Questions

• Where Are We ?
• Where Do we Want to be?
• How Will We Get There?

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Levels of Planning at General Electric
Figure 8.3
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Organizational Levels

• Corporate level (Strategic)
• What industries should the firm be in?
• What markets should the firm be in?
• In which businesses should the firm invest money?
• Business level (Tactical)
• Who are our direct competitors?
• What are their strengths and weaknesses? What
  advantages do we have over them?
• What are our own strengths and weaknesses?
• What do customers value in our products/services?

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Organizational Levels

• Functional level (Operational)
• What activities must my unit perform well in
  order to meet customer expectations?
• What information about competitors does my unit
  need in order to help the firm compete
  effectively?
• What are our units strengths and weaknesses?

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Strategic Planning Process
Internal Analysis
Mission Vision Objectives
Implement Strategies
Control Evaluate
Develop Strategies
External Analysis
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Competitive analysis in Strategy Formulation

• Environmental Assessment It includes economic ,
  technological, legal political socio- economic
  and international influences.
• The four environmental influences can be
  described in terms of
• Opportunity A favorable condition in the
  organization environment which enable it to
  consolidate and strengthen its position

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Competitive analysis in Strategy Formulation

• Threat- An unfavorable condition in the
  organization environment which creates risk for
  or damages to the organization
• Strength inherent capacity which org can use to
  gain strategic advantage
• Weakness An inherent limitation or constraint
  which creates strategic disadvantage

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Background for SWOT
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Planning and Strategy Formulation
Figure 8.5
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Strategic Planning Process
Internal Analysis
Mission Vision Objectives
Implement Strategies
Control Evaluate
Develop Strategies
External Analysis
Step Three
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Step ThreeIdentifying Strategies

• Once the organisation is fully informed about
  its environment (internal, operating and macro),
  it can then begin to develop strategies.
• Remember, a strategy is a pattern of actions
  employed to achieve an organisations objectives.

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Corporate level strategy framework

• Four Grand strategic alternatives
• Stability strategy
• Expansion strategy
• Retrenchment Strategy
• Combination Strategy

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Definition Of business

• Defining business on three dimension ,
• Customer group- Who is being satisfied
• Customer Function- What is being satisfied
• Alternative Technology- how it is being satisfied

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In time keeping business

• Customer group would be individual customers or
  industrial users
• Customer function would be finding time, using
  watches as fashionable accessory, a gift item or
  piece of art
• Alternative technology would be mechanical ,
  quartz , digital

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Expansion strategy

• Corporate strategy of expansion Is followed when
  an organization aims at high growth by
  substantially broadening the scope of one or more
  business in terms of their respective customer
  group, customer function and alternative
  technology

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Stability strategy

• Adopted by an organization when it attempts at
  incremental improvement of its performance by
  marginally changing one or more of its business
  in terms of their respective customer group,
  customer function and alternative technology

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Retrenchment Strategy

• When an organization aims at contraction of its
  activities through a substantial reduction or
  elimination of the scope of one or more of its
  business in terms of of their respective customer
  group, customer function and alternative
  technology

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Combination Strategy

• It is followed when an organization adopts a
  mixture of stability, expansion and retrenchment
  strategy either at the same time in its different
  business or at different times in one of its
  business with the aim of improving its
  performance

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Strategic Planning Process
Internal Analysis
Mission Vision Objectives
Implement Strategies
Control Evaluate
Develop Strategies
External Analysis
Step Four
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Implementing Strategy

• Strategy Implementation is a five step process.
• Allocating responsibility for implementing to the
  appropriate individuals or groups
• Drafting detailed action plans that specify how a
  strategy is to be implemented
• Establishing a timetable for implementation that
  includes precise, measurable goals linked to the
  attainment of the action plan.
• Allocating appropriate resources to the
  responsible individuals or groups.
• Holding Specific individuals or groups
  responsible for the attainment of corporate,
  divisional, and functional goals.

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Strategy Implementation

• Carrying out strategic plans
• Technology
• Human Resources
• Reward System
• Decision Processes
• Structure

• Maintaining Strategic Control

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Strategic Planning Process
Internal Analysis
Mission Vision Objectives
Implement Strategies
Control Evaluate
Develop Strategies
External Analysis
Step Five
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Step FiveControl

• Controlling is not the last function of
  management. This is because it is the function
  that monitors all other functions. Only through
  controlling can efficiency and effectiveness be
  maintained.

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BCG Matrix- tool for allocating resources
20- 18- 16- 14- 12- 10- 8- 6- 4-
2- 0
Stars
Question marks
4
?
?
1
3
?
?
5
2
Market growth rate
Dogs
Cash cow
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6
7
10x 4x 2x 1.5x 1x
.5x .4x .3x .2x .1x
Relative market share
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Corporte portfolio matrix

• Growth Share Matrix, Portfolio evaluation matrix
• It provides a graphic presentation for an
  organization to examine its different portfolios
  On the basis of relative market share and growth
  rate of markets
• Each of these cells represents particular type of
  business
• Stars
• High growth rate high mkt share business
• The companies in this generally pursue expansion
  strategies to establish strong competitive
  position with regard to star business
• Eg petrochemicals, fastfoods chains

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BCG

• Cash Cows
• High market share low growth rate
• They generate a lot of cash which may used to
  reinvest in other i.e question marks and stars
  SBUs
• Stability strategy adopted by the companies in
  this phase
• When cash cow declines then retrenchment
  strategy adopted
• Eg ITC Cigarettes
• Question Marks
• High growth rate low market share
• QM are usually new products or services
• There is no single set of strategy recommended
• EG ITC -Life products and retail , Holiday
  resorts, light weight commercial vehicles the dot
  com boom
• Dogs
• Low growth and low market share
• They neither generate profits nor losses
• Retrenchment strategy is used
• In PLC dogs are termed in decline stage
• EG Jute industries not able to exit the market
  because of government rules and regulations

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The BOSTON CONSULTING GROUP MATRIX
ITC Infotech, Retail and lifestyle , frozen foods
printing n packaging
Cigarettes
Aashirwad Atta
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• Examples
• TATA Group Stars (Tata Steel, Tata Motors, Taj
  Hotels)
• Cash Cows (TCS, Tata Tea, )
• Question Marks (Tata Indicom, Voltas)
• Dogs (Semi Conductor Business, Tata
  Wires )

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Business level strategies

• The dynamic factors that determine choice of
  competitive strategy according to Michael Porter
  are
• Industry structure
• Positioning of firm in that industry

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Industry Structure

• He identified 5 forces which shape the industry
  and invariably affect the competition hence the
  profitability and attractiveness

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Porters Five Forces Model Competition
analysis
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Porters 5 forces

• Threat of new entrants
• 2 factors important
• Entry barrier to an industry Retaliation from
  existing firms
• Economies of scale,
• Govt policies,
• Product differentiation,
• access to distribution channels
• Build up the presence gradually

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• Bargaining power of buyers
• Ability of buyers individually or collectively
  to force reduction in prices of products or
  services and add higher quality or better service
  or seek more value
• The bargaining power of buyers is high under
  these conditions
• When the buyers are few in numbers
• When buyers place large orders
• When alternative suppliers are present and are
  willing to supply at a lower price
• When the buyers itself charges low price for its
  product and is sensitive to price increase
• When the purchased product constitutes high
  percentage of buyer cost

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Bargaining power of Suppliers

• When the suppliers are few and buyers are many
• When the product and services are unique
• When the buyers buys in small quantity and is not
  impt to suppliers

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Porters 5 forces

• Threat of substitutes
• Substitute products means tea or coffee, aerated
  drinks fruit juices, postal, fax, courier
  services, bulb and tube lights
• The company can charge higher price and earn
  higher returns
• Threat of rivalry among competitors
• 1 player wins /loses at the expense of others
• Desire to be the market leader or to move
  towards larger market share leads to rivalry
  lower competition

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• Examples
• Chemical Fertilizer Industry faces low
  competitive advantage both from Suppliers side
  as well as buyers side (On the supply side the
  main ingredient for fertilizers i.e. Gas is in
  limited supply and on the customers front it has
  to deal with the local non branded players as
  the farmer is not literate enough to judge the
  branding)
• Reverse is the example of Maruti Suzuki
• Oil, Gas, Power these are areas where there are
  great barriers to entry

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Selecting a competitive advantage

• Cost leadership- when competitive advantage lies
  in a lower cost of product or service relative to
  what competitors have to offer.
• Differentiation-When the competitive advantage of
  a firm lies in special features incorporated into
  the product /service which are demanded by the
  customer who are willing to pay or those.

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Levels of Planning

• Focus- these strategies rely on either cost
  leadership or differentiation but cater to narrow
  segment of the total market.

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Generic Strategies
Zen, Toyota, Mercedes, Honda, King Fisher
Airlines
Maruti 800, Nano

for physically handicapped,Rolls Royce,
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• .1 Which level of managers is involved in the
  development of plans?
• a. Top-level managers
• b. Middle -level managers
• c. First-level managers
• d. All the above

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• 2 Organizations use contingency plans to cope
  with __________.
• a. Anticipated events
• b. Premeditated events
• c. Unforeseen events
• d. Predictable events

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• 3 What type of plan is used when unique
  situations of a non-recurring nature occur?
• A. Primary plans
• b. Secondary plans
• c. Single-use plans
• d. Standing plans

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• 4 Which of the following is an action-based and
  result-oriented management approach which
  contributes to the smooth and efficient
  functioning of organizations?
• a. Projects
• b. Programs
• c. Rules
• d. Policies

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• 5 Which of the following plans are rigid in
  nature and do not allow any deviation from the
  established guidelines?
• a. Programs
• b. Policies
• c. Rules
• d. Procedures

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• 6 Which one of the following is the first step
  in the planning process?
• a. Establishing objectives
• b. Analyzing opportunities
• c. Determining planning premises
• d, Identifying alternatives

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• 7 Generally 'strategic plans' is an
  important aspect of the jobs of
  ______managers.
• a. Operational-level
• b. Middle-level
• c. Top-level
• d. At all levels

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• 8 If goals are the desired ends, which of the
  following are the means for achieving those ends?
• a. Commitments
• b. Strategies
• c. Plans
• d. Programs

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• 9 Which of the following plans are developed by
  lower-level managers?
• a. Operational
• b. Tactical
• c. Strategic
• d. Standing

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• 10 Cost leadership, differentiation, and
  _________ are the the generic business-level
  strategies identified by Michael Porter.
• a. Growth
• b. Market leadership
• c. Focus
• d. Product leadership

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• 11 In a SWOT analysis, a ____ ,. regarded as an
  internal characteristic which can improve an
  organization competitive capabilities,
• a. Threat
• b. Weakness
• c. Strength
• d. Opportunity

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• 12 . A/an _____is an environment / condition
  that helps an organization
• improves its situation relative to its
  competitors.
• a. Strength
• b. Opportunity
• c. Threat
• d. Weakness

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• 13 According to Michael Porter's five competitive
  forces model, _____ can trigger price wars and/or
  increase the cost of doing business for existing
  businesses. A Rivalry
• B The threat of new entrants
• C The threat of substitute products or services
• D The bargaining power of suppliers.

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• 14 ____ refers to the extent to which customers
  can force prices down or secure higher quality or
  better service at the same price.
• A The bargaining power of customers
• B The bargaining power of suppliers
• C The threat of new entrants
• D Both b and c

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• 15 According to the BCG matrix, which of the
  following has a high market share in a rapidly
  growing market?
• A Cash cow
• B Star
• c. Question mark
• d. Dog

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• 16 Which of the following refers to the
  determination of the purpose and the basic
  long-term objectives of an enterprise, and the
  adoption of courses of action and the allocation
  of resources necessary for achieving those
  objectives?
• a. Strategies
• b. Plans
• c. Policies
• d. Procedures

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• 17Which category in the BCG matrix
• is a source of surplus cash?
• a. Problem children
• b. Stars
• c. Cash cows
• d. Dogs

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• 18 Which of the following is not an external
  threat to a company's well being?
• a. Reduction in sales due to substitute
• products
• b. Likely entry of new competitors
• c. Underutilized plant capacity
• d. Costly regulatory requirements

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• 19 Which one of the following
• constitutes a threat to the company?
• a. Serving additional customer groups
• b. Expanding the product line
• c. Integrating forward or backward
• d. Slowdown in market growth

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• 20 In which of the following situations do
  suppliers not have a high bargaining power?
• a. There are many suppliers in the
  industry b. There are no substitutes for
  products
• and services
• c. Products become important to a
• buyer's business
• d. There are many buyers in the
• industry